Testimony before the Committee on 

Veterans’ Affairs, U.S. Senate 

United States Government Accountability Office

GAO

For Release on Delivery 

Expected at 2:00 p.m. EDT 

Thursday, October 27, 2005 VA BENEFITS

Other Programs May 

Provide Lessons for 

Improving Individual 

Unemployability 

Assessments 

Statement of Cynthia Bascetta, Director, 

Education, Workforce, and Income Security Issues 

GAO-06-207T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-06-207T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Cynthia 

Bascetta at (202) 512-7215 or 

bascettac@gao.gov. 

Highlights of GAO-06-207T, a testimony 

before the Committee on Veterans' Affairs, 

U.S. Senate 

October 27, 2005

VA BENEFITS

Other Programs May Provide Lessons for 

Improving Individual Unemployability 

Assessments 

The disability programs of the three private insurers we reported on in 2001 

included the following common return-to-work practices in their disability 

assessment process: 

Incorporate return-to-work considerations from the beginning of the 

assessment process: Private insurers integrated return-to-work 

considerations early and throughout the eligibility assessment process. Their 

assessment process both evaluated a person’s potential to work and assisted 

those with work potential to return to the labor force. 

Provide incentives for claimants and employers to encourage and 

facilitate return to work: These incentives included requirements for 

obtaining appropriate medical treatment and participating in a return-towork program, if such a program would benefit the individual. In addition, 

they provided financial incentives to employers to encourage them to 

provide work opportunities for claimants. 

Strive to use appropriate staff to achieve accurate disability decisions and 

successful return-to-work outcomes: Private insurers have access to staff 

with a wide range of expertise not only in making eligibility decisions, but 

also in providing return-to-work assistance. The three private disability 

insurers told us that they selected the appropriate type and intensity of staff 

resources to assess and return individuals with work capacity to 

employment cost-effectively. 

In comparison, VA’s Individual Unemployability decision-making practices 

lag behind those used in the private sector. As we have reported in the past, 

a key weakness in VA’s decision-making process is that the agency has not 

routinely included a vocational specialist in the evaluation to fully evaluate 

the applicant’s ability to work. Preliminary findings from our ongoing work 

indicate that VA still does not have procedures in place to fully assess 

veterans’ work potential. In addition, the IU decision-making process lacks 

sufficient incentives to encourage return to work. In considering whether to 

grant IU benefits, VA does not have procedures to include vocational 

specialists from its Vocational Rehabilitation and Education (VR&E) 

services to help evaluate a veteran’s work potential. By not using these 

specialists, VA also misses an opportunity to have the specialist develop a 

return-to-work plan, in collaboration with the veteran, and identify and 

provide needed accommodations or services for those who can work. 

Instead, VA's IU assessment is focused on the veterans’ inabilities and 

providing cash benefits to those labeled as “unemployable,” rather than 

providing opportunities to help them return to work. Incorporating returnto-work practices could help VA modernize its disability program to enable 

veterans to realize their full productive potential without jeopardizing the 

availability of benefits for people who cannot work. 

The Department of Veterans Affairs 

(VA) provides disability 

compensation to veterans disabled 

by injuries or diseases that were 

incurred or aggravated while on 

active military duty. Under 

Individual Unemployability (IU) 

benefit regulations, a veteran can 

receive increased compensation at 

the total disability compensation 

rate if VA determines that the 

veteran is unemployable because of

service-connected disabilities. 

GAO has reported that numerous 

technological and medical 

advances, combined with changes 

in society and the nature of work, 

have increased the potential for 

people with disabilities to work. 

Yet, VA has seen substantial growth 

of IU benefit awards to veterans 

over the last five years. 

In 2001 GAO reported that a 

growing number of private 

insurance companies in the United 

States have focused their programs 

on developing and implementing 

strategies to enable people with 

disabilities to return to work. Our 

testimony will describe how U.S. 

private insurers facilitate return to 

work in three key areas: (1) the 

eligibility assessment process, 

(2) work incentives, and (3) 

staffing practices. It will also 

compare these practices with those 

of VA’s IU eligibility assessment 

process. 
Page 1 GAO-06-207T 

Mr. Chairman and Members of the Committee: 

Thank you for inviting me to testify on how the Department of Veterans 

Affairs (VA) Individual Unemployability (IU) disability assessment 

practices compare with those used by private sector insurers in helping 

people with severe disabilities realize their full potential to work. It is 

especially fitting, with the continuing deployment of our military forces to 

armed conflict, that we reaffirm our commitment to those who serve our 

nation in its times of need. Therefore, ensuring the most effective and 

efficient management of benefits and services to those who incur 

disabilities because of military service is of paramount importance. At the 

same time, many people with disabilities have indicated that they want to 

work and be independent and would do so if they receive the supports 

they need. Fortunately, numerous technological and medical advances, 

combined with changes in society and the nature of work, have increased 

the potential for people with disabilities to work. Nevertheless, VA has 

seen substantial growth of unemployability benefit awards to veterans 

with service-connected disabilities. From fiscal years 1999 to 2004, the 

number of veterans receiving unemployability benefits has more than 

doubled, from 95,000 to 197,000. 

To help people with disabilities achieve their full potential, the disability 

programs financed by social insurance systems in other countries focus on 

returning beneficiaries with disabilities to work. Also, in recent years, a 

growing number of private insurance companies in the United States have 

been focusing on developing and implementing strategies to enable people 

with disabilities to return to work. Today I would like to discuss how 

U.S. private sector disability programs facilitate return to work in three 

key areas: (1) the eligibility assessment process, (2) work incentives, and 

(3) staffing practices. I will describe these three elements for U.S. private 

sector disability insurers and compare these practices with those of VA’s 

IU eligibility assessment process. 

My testimony is based primarily upon our prior work, including our 

2001 report assessing the disability practices of selected private insurance 

companies and other countries.1

 This work involved in-depth interviews 

 1

See SSA Disability: Other Programs May Provide Lessons for Improving Return-to-Work 

Efforts, GAO-01-153 (Washington, D.C.: Jan. 12, 2001). In this report, we evaluated the 

disability systems of Germany, Sweden, and the Netherlands. We found that their disability 

programs are focused on return-to-work and include practices similar to those used in the 

U.S. private sector. 
Page 2 GAO-06-207T 

and document review for three private sector disability insurers: 

UNUMProvident, Hartford Life, and CIGNA. In addition, we used our 

1987 review of Individual Unemployability benefits2

 as well as preliminary 

observations from our ongoing review of these benefits. 

In summary, the disability systems of the private insurers we reviewed 

integrated return-to-work considerations early after disability onset and 

throughout the eligibility assessment process. This involved both 

determining—as well as enhancing—the ability of each claimant to return 

to work. For example, private insurers used vocational specialists to help 

ensure they fully assess the work capacity of claimants, identify needed 

accommodations, and develop individualized plans to help those who can 

return to work. In addition, these insurers provided incentives for 

claimants to take part in vocational rehabilitation programs and to obtain 

appropriate medical treatment. They also provided incentives for 

employers to provide work opportunities for claimants. Managers of these 

other programs also explained to us that they have developed 

techniques—such as separating (or triaging) claims—to use staff with the 

appropriate expertise to provide return-to-work assistance to claimants in 

a cost-effective manner. 

VA’s individual unemployability decision-making practices lag behind 

those used in the private sector. As we have reported in the past, a key 

weakness in VA’s decision-making process is that the agency did not 

routinely include a vocational specialist in the evaluation to fully evaluate 

an applicant’s ability to work. Preliminary findings from our ongoing work 

indicate that VA still does not have procedures in place to fully assess 

veterans’ work potential. In addition, the IU decision-making process lacks 

sufficient incentives to encourage return to work. In considering whether 

to grant IU benefits, VA does not have procedures to include vocational 

specialists from its Vocational Rehabilitation and Education (VR&E) 

services to help evaluate a veteran’s work potential. By not using these 

specialists, VA also misses an opportunity to have the specialist develop a 

return-to-work plan, in collaboration with the veteran, and identify and 

provide needed accommodations or services for those who can work. 

Instead, VA's IU assessment is focused on the veterans’ inabilities and 

providing cash benefits to those labeled as “unemployable,” rather than 

providing opportunities to help them return to work. Incorporating return-

 2

See Veterans’ Benefits: Improving the Integrity of VA’s Unemployability Compensation 

Program, GAO/HRD-87-62 (Washington, D.C.: Sept. 21, 1987). 
Page 3 GAO-06-207T 

to-work practices could help VA modernize its disability program to 

enable veterans to realize their full productive potential without 

jeopardizing the availability of benefits for people who cannot work. 

VA pays basic compensation benefits to veterans incurring disabilities 

from injuries or diseases that were incurred or aggravated while on active 

military duty. VA rates the severity of all service-connected disabilities by 

using its Schedule for Rating Disabilities. The schedule lists types of 

disabilities and assigns each disability a percentage rating, which is 

intended to represent an average earning impairment the veteran would 

experience in civilian occupations because of the disability. All veterans 

awarded service-connected disabilities are assigned single or combined 

(in case of multiple disabilities) ratings ranging from 0 to 100 percent, in 

increments of 10 percent, based on the rating schedule; such a rating is 

known as a schedular rating. Diseases and injuries incurred or aggravated 

while on active duty are called service-connected disabilities. 

Disability compensation can be increased if VA determines that the 

veteran is unemployable (not able to engage in substantially gainful 

employment) because of the service-connected disability. Under VA’s 

unemployability regulations, the agency can assign a total disability rating 

of 100 percent to veterans who cannot perform substantial gainful 

employment because of service-connected disabilities, even though their 

schedular rating is less than 100 percent. To qualify for unemployability 

benefits, a veteran must have a single service-connected disability of 

60 percent or more or multiple disabilities with a combined rating of 

70 percent or more, with at least one of the disabilities rated 40 percent or 

more. VA can waive the minimum ratings requirement and grant 

unemployability benefits to a veteran with a lower rating; this is known as 

an extra-schedular rating. 

Staff at VA’s regional offices make virtually all eligibility decisions for 

disability compensation benefits, including IU benefits. The 57 VA regional 

offices use nonmedical rating specialists to evaluate veterans’ eligibility 

for these benefits. Upon receipt of an application for compensation 

benefits, the rating specialist would typically refer the veteran to a VA 

medical center or clinic for an exam. Based on the medical examination 

and other information available to the rater, the rater must first determine 

which of the veteran’s conditions are or are not service-connected. For 

service-connected conditions, the rater compares the diagnosis with the 

rating schedule to assign a disability rating. 

Background 

VA’s Individual 

Unemployability Benefits 
Page 4 GAO-06-207T 

Along with medical records, raters may also obtain other records to 

evaluate an IU claim. VA may require veterans to furnish an employment 

history for the 5-year period preceding the date on which the veteran 

claims to have become too disabled to work and for the entire time after 

that date. VA guidance also requires that raters request basic employment 

information from each employer during the 12-month period prior to the 

date the veteran last worked. In addition, if the veteran has received 

services from VA’s VR&E program or Social Security disability benefits, 

the rater may also request and review related information from these 

organizations. 

Once VA grants unemployability benefits, a veteran may continue to 

receive the benefits while working if VA determines that the work is only 

marginal employment rather than substantially gainful employment. 

Marginal employment exists when a veteran’s annual earned income does 

not exceed the annual poverty threshold for one person as determined by 

the U.S. Census Bureau—$ 9,827 for 2004. Furthermore, if veterans are 

unable to maintain employment for 12 continuous months due to their 

service-connected disabilities they may retain their IU benefits, regardless 

of the amount earned. 

After more than a decade of research, GAO has determined that federal 

disability programs were in urgent need of attention and transformation 

and placed modernizing federal disability programs on its high-risk list in 

January 2003. Specifically, our research showed that the disability 

programs administered by VA and the Social Security Administration 

(SSA) lagged behind the scientific advances and economic and social 

changes that have redefined the relationship between impairments and 

work. For example, advances in medicine and technology have reduced 

the severity of some medical conditions and have allowed individuals to 

live with greater independence and function in work settings. Moreover, 

the nature of work has changed in recent decades as the national economy 

has moved away from manufacturing-based jobs to service- and 

knowledge-based employment. Yet VA’s and SSA’s disability programs 

remain mired in concepts from the past—particularly the concept that 

impairment equates to an inability to work—and as such, we found that 

these programs are poorly positioned to provide meaningful and timely 

support for Americans with disabilities. 

In contrast, we found that a growing number of U.S. private insurance 

companies had modernized their programs to enable people with 

disabilities to return to work. In general, private insurer disability plans 

Modernizing Federal 

Disability Programs 
Page 5 GAO-06-207T 

can provide short- or long-term disability insurance coverage, or both, to 

replace income lost by employees because of injuries and illnesses. 

Employers may choose to sponsor private disability insurance plans for 

employees either by self-insuring or by purchasing a plan through a private 

disability insurer. The three private disability insurers we reviewed 

recognized the potential for reducing disability costs through an increased 

focus on returning people with disabilities to productive activity. To 

accomplish this comprehensive shift in orientation, these insurers have 

begun developing and implementing strategies for helping people with 

disabilities return to work as soon as possible, when appropriate. 

The three private insurers we studied incorporate return-to-work 

considerations early in the assessment process to assist claimants in their 

recovery and in returning to work as soon as possible.3

 With the initial 

reporting of a disability claim, these insurers immediately set up the 

expectation that claimants with the potential to do so will return to work. 

Identifying and providing services intended to enhance the claimants’ 

capacity to work are central to their process of deciding eligibility for 

benefits. Further, the insurers continue to periodically monitor work 

potential and provide return-to-work assistance to claimants as needed 

throughout the duration of the claim. Their ongoing assessment process is 

closely linked to a definition of disability that shifts over time from less to 

more restrictive—that is, from an inability to perform one’s own 

occupation to an inability to perform any occupation. 

After a claim is received, the private insurers’ assessment process begins 

with determining whether the claimant meets the initial definition of 

disability. In general, for the three private sector insurers we studied, 

claimants are considered disabled when, because of injury or sickness, 

they are limited in performing the essential duties of their own occupation 

and they earn less than 60 to 80 percent of their predisability earnings, 

 3

Throughout the testimony, we use the term “claimant” to refer to both a person who 

submits a claim for disability insurance and a person who receives disability benefits for 

the lifetime of a claim. 

Private Insurers 

Incorporate Returnto-Work 

Considerations from 

the Beginning of the 

Assessment Process 
Page 6 GAO-06-207T 

depending upon the particular insurer.4 As part of determining whether the 

claimant meets this definition, the insurers compare the claimant’s 

capabilities and limitations with the demands of his or her own occupation 

and identify and pursue possible opportunities for accommodation—

including alternative jobs or job modifications—that would allow a quick 

and safe return to work. A claimant may receive benefits under this 

definition of disability for up to 2 years. 

As part of the process of assessing eligibility according to the “own 

occupation” definition, insurers directly contact the claimant, the treating 

physician, and the employer to collect medical and vocational information 

and initiate return-to-work efforts, as needed. Insurers’ contacts with the 

claimant’s treating physician are aimed at ensuring that the claimant has 

an appropriate treatment plan focused, in many cases, on timely recovery 

and return to work. Similarly, insurers use early contact with employers to 

encourage them to provide workplace accommodations for claimants with 

the capacity to work. 

If the insurers find the claimant initially unable to return to his or her own 

occupation, they provide cash benefits and continue to assess the claimant 

to determine if he or she has any work potential. For those with work 

potential, the insurers focus on return to work before the end of the 2-year 

period, when, for all the private insurers we studied, the definition of 

disability becomes more restrictive. After 2 years, the definition shifts 

from an inability to perform one’s own occupation to an inability to 

perform any occupation for which the claimant is qualified by education, 

training, or experience. Claimants initially found eligible for benefits may 

be found ineligible under the more restrictive definition. 

The private insurers’ shift from a less to a more restrictive disability 

definition after 2 years reflects the changing nature of disability and allows 

 4

The private insurers generally define one’s “own occupation” as the occupation a person is 

routinely performing at onset of disability. They generally assess how the claimant’s own 

occupation is performed in the national economy, rather than how the work is performed 

for a specific employer or at a specific location. Moreover, two of the insurers have 

expanded their “own occupation” definition of disability to include a reasonable alternative 

position. These two insurers require that a claimant who is judged able to do so accept a 

reasonable alternative position—a job in the same general location as that offered by the 

claimant’s current employer—or risk losing cash benefits. The claimant must be qualified 

to perform the work of this alternative position—which must pay the claimant more than 

60 to 80 percent of predisability earnings, depending upon the insurer—given his or her 

education, training, or experience. 
Page 7 GAO-06-207T 

a transitional period for insurers to provide financial and other assistance, 

as needed, to help claimants with work potential return to the workforce. 

During this 2-year period, the insurer attempts to determine the best 

strategy for managing the claim. Such strategies can include, for example, 

helping plan medical care or providing vocational services to help 

claimants acquire new skills, adapt to assistive devices to increase 

functioning, or find new positions. For those requiring vocational 

intervention to return to work, the insurers develop an individualized 

return-to-work plan, as needed. Basing the continuing receipt of benefits 

upon a more restrictive definition after 2 years provides the insurer with 

leverage to encourage the claimant to participate in a rehabilitation and 

return-to-work program. Indeed, the insurers told us they find that 

claimants tend to increase their efforts to return to work as they near the 

end of the 2-year period. 

If the insurer initially determines that the claimant has no work potential, 

it regularly monitors the claimant’s condition for changes that could 

increase the potential to work and reassesses after 2 years the claimant’s 

eligibility under the more restrictive definition of disability. The insurer 

continues to look for opportunities to assist claimants who qualify under 

this definition of disability in returning to work. Such opportunities may 

occur, for example, when changes in medical technology—such as new 

treatments for cancer or AIDS—may enable claimants to work, or when 

claimants are motivated to work. 

The private insurers that we reviewed told us that throughout the duration 

of the claim, they tailor the assessment of work potential and development 

of a return-to-work plan to the specific situation of each individual 

claimant. To do this, disability insurers use a wide variety of tools and 

methods when needed. Some of these tools, as shown in tables 

1 and 2, are used to help ensure that medical and vocational information is 

complete and as objective as possible. For example, insurers consult 

medical staff and other resources to evaluate whether the treating 

physician’s diagnosis and the expected duration of the disability are in line 

with the claimant’s reported symptoms and test results. Insurers may also 

use an independent medical examination or a test of basic skills, interests, 

and aptitudes to clarify the medical or vocational limitations and 

capabilities of a claimant. In addition, insurers identify transferable skills 

to compare the claimant’s capabilities and limitations with the demands of 

the claimant’s own occupation. This method is also used to help identify 

other suitable occupations and the specific skills needed for these new 

occupations when the claimant’s limitations prevent him or her from 

returning to a prior occupation. Included in these tools and methods are 
Page 8 GAO-06-207T 

services to help the claimant return to work, such as job placement, job 

modification, and retraining. 

Table 1: Medical Assessment: Tasks, Tools, and Methods 

Task Tools and methods 

Assess the diagnosis, treatment, and 

duration of the impairment and begin 

developing a treatment plan focused on 

returning the claimant to work promptly 

and safely 

Consultation of medical staff and other 

resources, including current medical 

guidelines describing symptoms, expected 

results from diagnostic tests, expected 

duration of disability, and treatment 

Assess the claimant’s cognitive skills Standardized mental tests 

Validate the treating physician’s 

assessment of the impairment’s effect on 

the claimant’s ability to work and the most 

appropriate treatment and accommodation 

Review of the claimant’s file, generally by a 

nurse or a physician who is not the 

claimant’s treating physician 

Verify the diagnosis, level of functioning, 

and appropriateness of treatment 

Independent medical examination of the 

claimant by a contracted physician 

Evaluate the claimant’s ability to function, 

determine needed assistance, and help the 

claimant develop an appropriate treatment 

plan with the physician 

Home visits by a field nurse or investigator 

or accompanied doctor visits 

Assess the claim’s validity Home visits and interviews with neighbors 

or others who have knowledge of the 

claimant’s activities 

Source: GAO analysis of private insurers’ practices. 
Page 9 GAO-06-207T 

Table 2: Vocational Assessment and Assistance: Tasks, Tools, and Methods 

Task Tools and methods 

Identify transferable skills, validate 

restrictions on and capabilities for 

performing an occupation, and identify 

other suitable occupations and retraining 

programs 

• Test basic skills, such as reading or 

math 

• Determine interests and aptitudes 

• Evaluate functional capacities 

associated with an occupation, such as 

lifting, walking, and following directions 

• Compare functional capacities, work 

history, education, and skills with the 

demands of an occupation 

Enhance work capabilities and help 

develop job-seeking skills 

• Provide résumé preparation, help 

develop job-seeking skills, and help with 

job placement 

• Assist in obtaining physical, 

occupational, or speech therapy and 

access to employee assistance, support 

groups, or state agency vocational 

rehabilitation or other community 

services 

• Identify and fund on-the-job training or 

other educational courses 

Assess ability to perform own or any 

occupation, assess potential for 

accommodation, and determine whether 

sufficient salary is offered locally or 

nationally for a suitable occupation 

• Observe and analyze the essential 

duties of the claimant’s own occupation, 

another occupation for the same 

employer, or an occupation of a 

prospective employer 

• Determine the general availability and 

salary range of specified occupations 

• Identify for a specified occupation the 

potential employers and related job 

descriptions, salary range, and openings

Reaccustom claimant to a full work 

schedule and enable claimant to 

overcome impairment and return to work 

• Provide work opportunities for the 

claimant to gradually resume his or her 

job duties 

• Procure devices to assist with work or 

otherwise help to modify the job 

Source: GAO analysis of private insurers’ practices. 
Page 10 GAO-06-207T 

To facilitate return to work, the private insurers we studied employment 

incentives both for claimants to participate in vocational activities and 

receive appropriate medical treatment, and for employers to 

accommodate claimants. The insurers require claimants who could benefit 

from vocational rehabilitation to participate in an individualized return-towork program. They also provide financial incentives to promote 

claimants’ efforts to become rehabilitated and return to work. To better 

ensure that medical needs are met, the insurers we studied require that 

claimants receive appropriate medical treatment and assist them in 

obtaining this treatment. In addition, they provide financial incentives to 

employers to encourage them to provide work opportunities for claimants. 

The three private insurers we reviewed require claimants who could 

benefit from vocational rehabilitation to participate in a customized 

rehabilitation program or risk loss of benefits. As part of this program, a 

return-to-work plan for each claimant can include, for example, adaptive 

equipment, modifications to the work site, or other accommodations. 

These private insurers mandate the participation of claimants whom they 

believe could benefit from rehabilitation because they believe that 

voluntary compliance has not encouraged sufficient claimant participation 

in these plans.5

The insurers told us that they encourage rehabilitation and return to work 

by allowing claimants who work to supplement their disability benefit 

payments with earned income.6

 During the first 12 or 24 months of 

receiving benefits, depending upon the particular insurer, claimants who 

are able to work can do so to supplement their benefit payments and 

thereby receive total income of up to 100 percent of predisability 

 5

Although claimants may be involved in the development of the individualized 

rehabilitation plans, the insurers make the final decision about the types of rehabilitation 

services claimants will receive. 

6

The private disability insurers we reviewed told us that their benefits generally replace 

60 percent of predisability earnings, depending upon the insurer. 

Private Insurers 

Provide Incentives for 

Claimants and 

Employers to 

Encourage and 

Facilitate Return to 

Work 
Page 11 GAO-06-207T 

earnings.7 After this period, if the claimant is still working, the insurers 

decrease the benefit amount so that the total income a claimant is allowed 

to retain is less than 100 percent of predisability income. 

When a private insurer, however, determines that a claimant is able, but 

unwilling, to work, the insurer may reduce or terminate the claimant’s 

benefits. To encourage claimants to work to the extent they can, even if 

only part-time, two of the insurers told us they may reduce a claimant’s 

benefit by the amount the claimant would have earned if he or she had 

worked to maximum capacity. The other insurer may reduce a claimant’s 

monthly benefit by the amount that the claimant could have earned if he or 

she had not refused a reasonable job offer—that is, a job that was 

consistent with the claimant’s background, education, and training. 

Claimants’ benefits may also be terminated if claimants refuse to accept a 

reasonable accommodation that would enable them to work. 

Since medical improvement or recovery can also enhance claimants’ 

ability to work, the private insurers we studied not only require, but also 

help, claimants to obtain appropriate medical treatment. To maximize 

medical improvement, these private insurers require that the claimant’s 

physician be qualified to treat the particular impairment. Additionally, two 

insurers require that treatment be provided in conformance with medical 

standards for treatment type and frequency. Moreover, the insurers’ 

medical staff work with the treating physician as needed to ensure that the 

claimant has an appropriate treatment plan. The insurers told us they may 

also provide funding for those who cannot otherwise afford treatment. 

The three private sector insurers we studied may also provide financial 

incentives to employers to encourage them to provide work opportunities 

for claimants. By offering lower insurance premiums to employers and 

paying for accommodations, these private insurers encourage employers 

to become partners in returning disabled workers to productive 

employment. For example, to encourage employers to adopt a disability 

 7

To illustrate, assume that Ms. Jones is a claimant with predisability earnings of $1,000 per 

month and an insurance policy that replaces 60 percent of her predisability earnings. She is 

currently not working. Under this scenario, her income would be limited to $600 per month 

in disability benefits. However, if she returned to work, even part-time, she would have the 

opportunity to increase her total income to 100 percent of her predisability earnings or, in 

this instance, $1,000. If she returned to work and earned $500 per month, the insurer would 

reduce her benefit payment from $600 to $500 per month, so that her combined earnings 

and benefit payment would provide a total monthly income equal to her predisability 

income of $1,000. 
Page 12 GAO-06-207T 

policy with return-to-work incentives, the three insurers offer employers a 

discounted insurance premium. If their disability caseload declines to the 

level expected for those companies that assist claimants in returning to 

work, the employers may continue to pay the discounted premium 

amount. These insurers also fund accommodations, as needed, for 

disabled workers at the employer’s work site.8

The private disability insurers we studied have developed techniques for 

using the right staff to assess eligibility for benefits and return those who 

can to work. Officials of the three private insurers told us that they have 

access to individuals with a range of skills and expertise, including 

medical experts and vocational rehabilitation experts. They also told us 

that they apply this expertise as appropriate to cost effectively assess and 

enhance claimants’ capacity to work. 

The three private disability insurers that we studied have access to 

multidisciplinary staff with a wide variety of skills and experience who can 

assess claimants’ eligibility for benefits and provide needed return-to-work 

services to enhance the work capacity of claimants with severe 

impairments. The private insurers’ core staff generally includes claims 

managers, medical experts, vocational rehabilitation experts, and team 

supervisors. The insurers explained that they set hiring standards to 

ensure that the multidisciplinary staff is highly qualified. Such 

qualifications are particularly important because assessments of benefit 

eligibility and work capacity can involve a significant amount of 

professional judgment when, for example, a disability cannot be 

objectively verified on the basis of medical tests or procedures or clinical 

examinations alone.9

 Table 3 describes the responsibilities of this core 

staff of experts employed by private disability insurers, as well as its 

general qualifications and training. 

 8

Educating employers about the size and extent of disability costs is an important element 

in motivating employers to promote efforts to return claimants to work. For example, one 

of the private insurers we reviewed educates employers about the direct and indirect costs 

of not controlling lost time associated with disability, which this insurer estimated to 

amount to 4 to 6 percent of an employer’s payroll. 

9

According to one insurer, disabilities with subjective diagnoses include certain types of 

mental illness, fibromyalgia, chronic pain (often back pain), and chronic fatigue syndrome. 

Private Insurers Strive 

to Use Appropriate 

Staff to Achieve 

Accurate Disability 

Decisions and 

Successful Return-toWork Outcomes 
Page 13 GAO-06-207T 

Table 3: Responsibilities and Qualifications of Staff Employed by Private Disability Insurers to Assess and Enhance a 

Claimant’s Work Potential 

Type of staff Responsibilities Qualifications and training 

Claims managers • Determine disability benefit eligibility. 

• Develop, implement, and monitor an 

individualized claim management strategy. 

• Serve as primary contact for the claimant and 

the claimant’s employer. 

• Focus on facilitating the claimant’s timely, safe 

return to work. 

• Coordinate the use of expert resources. 

One insurer gives preference to those with a 

college degree and requires insurance claims 

experience and specialized training and 

education. 

Another requires a college degree, a passing 

grade on an insurer-sponsored test, and 

specialized training and coaching. 

Medical and related expertsa • Collect and evaluate medical and functional 

information about the claimant to assist in the 

eligibility assessment and help to ensure that 

claimants receive the appropriate medical care 

to enable them to return to work. 

• At one insurer, physicians also help train 

company staff. 

Medical staff include registered nurses with 

case management or disability-related 

experience and experts in behavioral and 

mental issues, such as psychologists, 

experienced psychiatric nurses, and licensed 

social workers. Two insurers also employ boardcertified physicians in various specialties.b

Vocational rehabilitation experts • Help assess the claimant’s ability to work. 

• Help overcome work limitations by identifying 

needed assistance, such as assistive devices 

and additional training, and ensuring that it is 

provided. 

Rehabilitation experts are master’s-degree-level 

vocational rehabilitation counselors. In addition, 

one insurer requires board certification and 5 

years of experience. 

Supervisors • Provide oversight, mentoring, and training. One insurer gives preference to those with a 

college degree and requires 3 years’ disability 

experience, some management experience, and 

specialized training. Another insurer requires a 

college degree, more than 12 years’ disability 

claims experience, and completion of courses 

leading to a professional designation. 

Source: GAO analysis of private insurers’ practices. 

a

At one company, the medical experts are employees of a company subsidiary but are often 

colocated with the insurer’s employees. 

b

One company, for example, employs 85 part- and full-time physicians, including psychiatrists, 

doctors of internal medicine, orthopedists, family practice physicians, cardiologists, doctors of 

occupational medicine, and neurologists. 

The three disability insurers we reviewed use various strategies for 

organizing their staff to focus on return to work, with teams organized to 

manage claims associated either with a specific impairment type or with a 

specific employer (that is, the group disability insurance policyholder). 

One insurer organizes its staff by the claimant’s impairment type—for 

example, cardiac/respiratory, orthopedic, or general medical—to develop 

in-depth staff expertise in the medical treatments and accommodations 

targeted at overcoming the work limitations associated with a particular 
Page 14 GAO-06-207T 

impairment. The other two insurers organize their staff by the claimant’s 

employer because they believe that this enables them to better assess a 

claimant’s job-specific work limitations and pursue workplace 

accommodations, including alternative job arrangements, to eliminate 

these limitations.10 Regardless of the overall type of staff organization, 

each of the three insurers facilitates the interaction of its core staff—

claims managers, medical experts, and vocational rehabilitation experts—

by pulling these experts together into small, multidisciplinary teams 

responsible for managing claims. Additionally, one insurer engenders team 

interaction by physically colocating core team members in a single 

working area. 

To provide a wide array of needed experts, the three disability insurers 

expand their core staff through agreements or contracts with subsidiaries 

or other companies. These experts—deployed both at the insurer’s work 

site and in the field—provide specialized services to support the eligibility 

assessment process and to help return claimants to work. For instance, 

these insurers contract with medical experts beyond their core employee 

staff—such as physicians, psychologists, psychiatrists, nurses, and 

physical therapists—to help test and evaluate the claimant’s medical 

condition and level of functioning. In addition, the insurers contract with 

vocational rehabilitation counselors and service providers for various 

vocational services, such as training, employment services, and vocational 

testing. 

The private insurers we examined told us that they strive to apply the 

appropriate type and intensity of staff resources to cost-effectively return 

to work claimants with work capacity. The insurers described various 

techniques that they use to route claims to the appropriate claims 

management staff, which include separating (or triaging) different types of 

claims and directing them to staff with the appropriate expertise. 

According to one insurer, the critical factor in increasing return-to-work 

rates and, at the same time, reducing overall disability costs is proper 

triaging of claims. In general, the private insurers separate claims by those 

who are likely to return to work and those who are not expected to return 

to work. The insurers told us that they assign the type and level of staff 

necessary to manage claims of people who are likely to return to work on 

 10All three insurers, however, have behavioral care specialists specifically for managing 

psychiatric claims. 
Page 15 GAO-06-207T 

the basis of the particular needs and complexity of the specific case (see 

table 4). 

Table 4: Staff Assignment for Claims Management by Triage Category 

Triage category Staff assigned 

Types of return-to-work services 

provided 

Likely to return to work 

Condition requires medical assistance and 

more than 1 year to stabilize medically. 

Medical specialist • Recommend improvements in treatment 

plan to treating physician 

• Refer claimant for more specialized or 

appropriate medical services 

• Ensure frequency of treatment meets 

standards for condition 

Condition requires less than a year to 

stabilize. 

Claims manager • Monitor medical condition 

• Maintain contact with employer and 

physician to ensure return to work 

• Obtain input from medical and vocational 

specialists as needed 

Condition is stabilized, and claimant needs 

rehabilitation or job accommodation to 

return to work. 

Multidisciplinary team including 

• Vocational expert 

• Medical expert 

• Claims specialist 

• Other specialists as needed 

• Evaluate claimant’s functional abilities 

for work 

• Customize return-to-work plan 

• Arrange for needed return-to-work 

services 

• Monitor progress against expected 

return-to-work date 

Unlikely to return to work 

Claimant is determined unable to return to 

work. 

Claims manager • Review medical condition and level of 

functioning regularly 

Source: GAO analysis of private insurers’ practices. 

As shown in table 4, claimants expected to need medical assistance, such 

as those requiring more than a year for medical stabilization, are likely to 

receive an intensive medical claims management strategy. A medical 

strategy involves, for example, ensuring that the claimant receives 

appropriate medical treatment. Claimants who need less than a year to 

stabilize medically are managed much less intensively. For these claims, a 

claims manager primarily monitors the claimant’s medical condition to 

assess whether it is stable enough to begin vocational rehabilitation, if 

appropriate. Alternatively, a claimant with a more stable, albeit serious, 

medical condition who is expected to need vocational rehabilitation, job 

accommodations, or both to return to work might warrant an intensive 

vocational strategy. The private disability insurers generally apply their 

most resource-intensive, and therefore most expensive, multidisciplinary 

team approach to these claimants. Working closely with the employer and 
Page 16 GAO-06-207T 

the attending physician, the team actively pursues return-to-work 

opportunities for claimants with work potential. 

Finally, claimants who are likely not to return to work (or “stable and 

mature” claims) are generally managed using a minimum level of 

resources, with a single claims manager responsible for regularly 

reviewing a claimant’s medical condition and level of functioning.11 The 

managers of these claims carry much larger caseloads than managers of 

claims that receive an intensive vocational strategy. For example, one 

insurer’s average claims manager’s caseload for these stable and mature 

claims is about 2,200 claims, compared with an average caseload of 80 

claims in the same company for claims managed more actively. 

Unlike disability compensation programs in the private sector, VA has not 

drawn on vocational experts for IU assessments to examine the claimant’s 

work potential and identify the services and accommodations needed to 

help those who could work to realize their full potential. In our 1987 

report, we found that VA had not routinely obtained all vocational 

information needed to determine a veteran's ability to engage in 

substantially gainful employment before it granted IU benefits. Without 

understanding how key vocational factors, such as the veteran’s 

education, training, earnings, and prior work history, affect the veteran’s 

work capacity, VA cannot adequately assess the veteran’s ability to work. 

To perform this analysis, VA officials told us that the agency has 

vocational specialists who are specially trained to perform this difficult 

analysis. Skilled vocational staff can determine veterans’ vocational 

history, their ability to perform past or other work, and their need for 

retraining. By not collecting sufficient information and including the 

expertise of vocational specialists in the assessment, VA did not have an 

adequate basis for awarding or denying a veteran's claim for 

unemployability benefits. 

Preliminary findings from our ongoing work indicate that VA still does not 

have procedures in place to fully assess veterans’ work potential. In 

addition, the IU decision-making process lacks sufficient incentives to 

encourage return to work. In considering whether to grant IU benefits, VA 

does not have procedures to include vocational specialists from its VR&E 

 11The insurers review these claims on a regular basis, ranging from every 6 months to every 

3 years, depending upon the insurer and the characteristics of the claim. 

VA’s Individual 

Unemployability 

Return-to-Work 

Efforts Lag behind 

Other Programs 
Page 17 GAO-06-207T 

services to help evaluate a veteran’s work potential. By not using these 

specialists, VA also misses an opportunity to have the specialist develop a 

return-to-work plan, in collaboration with the veteran, and identify and 

provide needed accommodations or services for those who can work. 

Instead, VA's IU assessment is focused on the veterans’ inabilities and 

providing cash benefits to those labeled as “unemployable,” rather than 

providing opportunities to help them return to work. 

Return-to-work practices used in the U.S. private sector reflect the 

understanding that people with disabilities can and do return to work. The 

continuing deployment of our military forces to armed conflict has 

focused national attention on ensuring that those who incur disabilities 

while serving in the military are provided the services needed to help them 

reach their full work potential. Approaches from the private sector 

demonstrate the importance of using the appropriate medical and 

vocational expertise to assess the claimant’s condition and provide 

appropriate medical treatment, vocational services, and work incentives. 

Applying these approaches to VA’s IU assessment process would raise a 

number of important policy issues. For example, to what extent should the 

VA require veterans seeking IU benefits to accept vocational assistance or 

appropriate medical treatment? Such policy questions will be answered 

through the national policymaking process involving the Congress, VA, 

veterans’ organizations, and other key stakeholders. Nevertheless, we 

believe that including vocational expertise in the IU decision-making 

process could provide VA with a more adequate basis to make decisions 

and thereby better ensure program integrity. Moreover, incorporating 

return-to-work practices could help VA modernize its disability program to 

enable veterans to realize their full productive potential without 

jeopardizing the availability of benefits for people who cannot work. 

Mr. Chairman, this concludes my prepared statement. I would be pleased 

to respond to any questions you or members of the committee may have. 

For future contacts regarding this testimony, please call Cynthia Bascetta 

at (202) 512-7215. Carol Dawn Petersen, Julie DeVault, and 

Joseph Natalicchio also made key contributions to this testimony. 

Concluding 

Observations 
Page 18 GAO-06-207T 

21st Century Challenges: Reexamining the Base of the Federal 

Government, GAO-05-325SP (Washington, D.C.: February 2005). 

High-Risk Series: An Update, GAO-05-207 (Washington, D.C.: January 

2005). 

High–Risk Series: An Update, GAO-03-119 (Washington, D.C.: January 

2003). 

SSA and VA Disability Programs: Re-Examination of Disability 

Criteria Needed to Help Ensure Program Integrity, GAO-02-597

(Washington, D.C.: Aug. 9, 2002). 

SSA Disability: Other Programs May Provide Lessons for Improving 

Return-to-Work Efforts, GAO-01-153 (Washington, D.C.: Jan. 12, 2001). 

SSA Disability: Return-to-Work Strategies May Improve Federal 

Programs, GAO/HEHS-96-133 (Washington, D.C.: July 11, 1996). 

Veterans’ Benefits: Improving the Integrity of VA’s Unemployability 

Compensation Program, GAO/HRD-87-62 (Washington, D.C.: Sept. 21, 

1987). 

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